Deforestation disclosure: “Silence is deafening” as most companies fail to divulge soy and palm oil impacts

22 Jul 2019 --- Just 24 percent of high-impact food and agriculture companies are disclosing their effects on forests, according to a report from CDP, a UK-based organization aiming to make environmental reporting and risk management a business norm. Of the 1,500 high-impact companies across all industries, just 306 – of which the food, beverage and agriculture sector make up 104 – released information about their palm oil, soy, as well as cattle and timber. While the majority of companies responding are from the food sectors, their overall disclosure rate is still low.

“We are surprised to see food companies are not using the CDP forests questionnaire as guidance to improve their understanding of deforestation-related risks and opportunities. It’s disappointing to see global grain producer Louis Dreyfus not join the other top three international soy traders (Cargill, Bunge and Archer Midland Daniels) in using the CDP disclosure platform to be transparent about their work to achieve deforestation-free soy,” Morgan Gillespy, Global Director of Forests at CDP, tells FoodIngredientsFirst.

Palm oil, cattle, soy and timber are all commodities that drive deforestation as forests are razed to make room for cattle ranching, plantations or agriculture. Examples of usage are palm oil in chocolates, soy in tofu and paper for packaging. However, deforestation is a significant risk to business due to the ecological importance of forests and the heightened environmental concern among investors, buyers and consumers.

Click to EnlargeSoy is one of the leading commodities associated with deforestation. Additionally, the CDP’s new report focusing on the role of corporate action in deforestation, The Money Trees, finds that across all industries there is reduced corporate transparency about forests (30 percent disclosure rate). This is in comparison to other environmental issues such as climate change and water security, both of which have a 43 percent disclosure rate.

Gillespy notes that the reasons companies give for not disclosing include that the issues are not material to their business; that they don’t have enough resources, capacity or budget to adequately undertake the work necessary to report; or that they don’t have the internal buy-in or support from senior management.

“Some companies also fear reporting less-than-perfect responses and are concerned that until they make significant progress, they should not report. Yet we see that actually, a lack of disclosure will often mean continued lack of awareness and action, while disclosure can support a company in leveraging the data collection needed to assess their exposure to deforestation in their supply chain and inform appropriate action,” she continues.

Additionally, even if companies are reporting information in their own sustainability reports, that is not comparable to other companies and allows them to set the narrative they want to tell, according to Gillespy. “CDP’s questionnaires are robust, comprehensive and standardized, so companies all report the same relevant and comparable data.”

Businesses are at risk of facing a backlash if they do not listen to calls from customers, investors and consumers for transparency and forest protection. Gillespy notes that companies already see reputational risk as the top deforestation risk, and that this is likely to increase as sustainable consumption trends continue and the market shifts. “Consumers want to know that their shopping basket is not driving the destruction of the Amazon, extinction of the orangutans and the climate crisis,” she adds.

The rising awareness around deforestation was brought to the fore last Christmas when UK supermarket Iceland – which has banned palm oil use from its own-label products – used a Greenpeace-made anti-palm oil video as a TV commercial. The orangutan-featuring ad was subsequently banned for being “too political,” but highlighted how consumers are caring more about reducing deforestation.

Not enough being done
Although nearly 450 companies (across all industries) and over 50 governments have pledged to end deforestation by 2020, this is currently wildly out of reach. While some companies have publicly stated that the deadline will be missed, 83 percent of corporate targets on deforestation end in 2020, with only 14 percent extending past that. Furthermore, corporate action on sustainable sourcing of timber and palm oil is more advanced than that for beef and soy, highlighting how the food industry must do more.

Additionally, of the companies that did respond to CDP, their level of action is still insufficient to solve deforestation. Around a quarter of companies across all industries are taking limited deforestation action – for example, only focusing on one commodity – or are taking no action at all. Additionally, more than a third of companies are not working with their suppliers to reduce deforestation – a huge gap as deforestation nearly always stems from the supply chain.Click to EnlargeBusinesses that do not tackle deforestation risk heavy losses.

“On a global scale, it’s also critical to halt deforestation because forests have a huge role to play in solving the climate crisis. Deforestation is the second largest source of anthropogenic greenhouse gas emissions on the planet after fossil fuels, responsible for 15 percent of global GHG emissions. As forests also remove CO2 from the atmosphere, halting deforestation is critical to reducing emissions in line with a 1.5°C world,” Gillespy explains. 

Climate change is a hot topic for the food industry with many key players setting ambitious goals to reduce greenhouse gas emissions, cut down on waste, use energy efficiently and streamline strategies to tackle what is a profound challenge with direct implications on food safety, supply chains and raw materials. Last October, the Intergovernmental Panel on Climate Change (IPCC), issued a stark warning about the urgency to limit global warming to 1.5°C. This, they said, requires rapid, far-reaching and unprecedented changes in all aspects of society, including agricultural and food systems. 

As well as it being critical that companies reduce their deforestation for global sustainability, they also need to make changes to mitigate against a potential loss of US$30.4 billion. The sum accounts for a quarter of possible losses across all industries due to the impact of deforestation risk, including brand damage, regulatory change and physical impacts like forest fires and crop failures.

Meanwhile, companies that have been making moves to reduce their deforestation have been benefiting financially. Seventy-six companies (across all industries) reported business opportunities - such as increased brand value and product innovation - valued at US$26.8 billion.

“CDP has identified four key actions that companies should be taking: setting clear and concrete targets, working with their supply chain, using certification and engaging with external initiatives to tackle deforestation collaboratively,” Gillespy recommends.

By Katherine Durrell

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